McCarthy failed to sell vision for the future

Institutional investors will remember
Brian McCarthy
for his ability to run a tight ship and expect his successor to stick by
Fairfax Media
’s recently announced strategy.

Fund managers were mostly surprised by Mr McCarthy’s sudden resignation yesterday, which came less than two weeks after he presented them with a new group strategy.

Colonial First State Global Asset Management’s head of Australian equities, Marcus Fanning, said Mr McCarthy was at times too honest for his own good. “He never glossed things over, never talked things up and tended to let results speak for themselves," Mr Fanning said. “But he was pretty good on the costs."

Mr McCarthy’s recent strategy update received a lukewarm response from investors. The strategy highlighted potential merger and acquisition activity and aimed to help the company make a transition into new world media, but it failed to materially boost Fairfax Media’s share price.

Fund managers expect acting chief executive
Greg Hywood
to stand by the announced strategy until a full-time replacement is found. “Communicating the strategy, whether it is liked or not, was a positive step," Arnhem Investment Management managing partner Neil Boyd-Clark said. “I don’t necessarily think that this strategy will now fall apart."

He said Fairfax had “plenty" of talent at its disposal to appoint a permanent replacement from within company ranks, though the search was expected to be global.

Fairfax shares gained 5¢ or 3.8 per cent under Mr McCarthy’s leadership, while the broader S&P/ASX 200 rose 34.4 per cent. But fund managers were quick to jump to the former CEO’s defence.

“It’s quite a big challenge going up against the online leaders in terms of the classifieds, real estate and employment markets," Northward Capital chief investment officer Simon Rutherfurd said. “I think it’s been quite a stressful period since the [global financial crisis]."